These are the coolest things ever!
Honestly, I could not write up better instructions than this person, Paper Tart's Shrinky Dinks, so just visit their site.
The supplies are simple
Recycled #6 plastic (ask your local deli manager to donate some and ask your co-workers to recycle with you)
Scissors and a Heat Gun
To put it simply, you draw a cool image on the plastic with the sharpie and cut around it. (Keep in mind, it shrinks to about 1/3 the size.) Cut a small hole in it if you plan on using it for a necklace or keychain. Heat it with the heat gun on a heat resistant surface (I use an old cutting board). Because the heat gun blows, you can hold the plastic still with pliers. (Don't worry when it balls up, just keep heating it.)